Bookkeeping vs. Accounting: What’s the Difference?

The roles of both the bookkeeper and accountant are key to running a successful business. Without the right support and reliable figures, how can you make the best decisions for your business? So we take a look at the differences between bookkeeping vs. accounting.

Who acts as the bookkeeper?

Depending on the size of the business, it may be that the owner is the bookkeeper as that keeps the initial costs of running the business down which is important on start-up. This can also be a recipe for initial success, as an owner that prepares the bookkeeping is likely to have a very good view of the finances of the business, which in turn is likely to result in the best decisions being made.

A bookkeeper can also be a staff member employed by the business in-house or, alternatively, the work can be outsourced to an accounting practice. Either way, you need to make sure you are confident they know what they are doing – a good way of establishing this is to look at their qualifications and/or experience.

What is the bookkeeper’s role?

A bookkeeper’s role would normally entail processing the purchase and sales invoices of the company, as well as maintaining and reconciling the bank and cash accounts. This would normally be done on a piece of accounting software such as Xero. They would also be responsible for preparing and submitting VAT returns (if applicable).

Getting the above right is important because if the bookkeeping software isn’t accurate, any information you then take will be incorrect. This could lead you to make poor decisions based on information that isn’t representative of how the business is performing. It could also lead to the submission of an incorrect VAT return, which might mean fines and penalties.

If you are hiring a bookkeeper the experience can count for a lot, so look at their CV and make sure they have the relevant experience. If you are looking at an accounting practice then check to see if they are a qualified firm – they will normally mention that they are chartered accountants.

Bookkeeping vs. accounting

Once the bookkeeping work has been finalised, it will normally be the role of an accountant to review the figures and pull them into a set of accounts. Accounts have to be prepared annually for sole traders, partnerships and companies. This means as a minimum, one set of accounts will be prepared each year.

On top of the above, a client may wish to have management accounts prepared monthly or quarterly depending on their requirements. These would be for the owners/directors to have a regularly updated set of reliable figures on which they can make decisions to move the business forward. Again, these would normally be prepared by an accountant.

Both bookkeepers and accountants have a key role to play in the successful running of a business and, in some cases, they can be one and the same!

If you would like to know more about the difference between bookkeeping and accounting, please do not hesitate to get in touch.